The automotive components industry in the country has scaled Rs 2,500 billion in 2015-16 while exports have grown even faster to Rs 702 billion. The Indian auto component industry is expected to grow by 8-10 per cent in FY 2017-18, based on higher localisation by Original Equipment Manufacturers (OEM), higher component content per vehicle, and rising exports, as per data from ICRA Limited.
According to the Automotive Component Manufacturers Association of India (ACMA), the Indian auto-components industry is expected to register a turnover of INR 6,500 billion by 2020 backed by strong exports.
Endurance Technologies is in the business of manufacturing auto components for two-wheelers, three-wheelers, four-wheeler engaged in design, development, testing and aftermarket sales.
According to the Aluminium Caters Association of India, Endurance Technologies Ltd is the number one aluminium die casting company in India in terms of actual output and installed capacity in FY 2016.
The company mainly caters to two-wheeler sector (55 per cent), three-wheeler (10%) and four-wheelers (35 per cent). Majority of revenue comes from India (67 per cent) followed by Europe (31 per cent).
The company operates 18 manufacturing plants in India, all of which are strategically located and seven manufacturing plants in Germany and Italy.
Mr. Naresh Chandra – Chairman
Mr. Anurang Jain – Managing Director
In FY16, total revenue of the company has increased by 7 per cent to Rs 5,627.80 crore on a YoY basis. The net profit earned by the company was Rs 289.3 crores
Between FY14 and FY16, the company reported an 8.4 per cent CAGR in total domestic revenue compared with a production growth of 5.6 per cent and 6.1 per cent CAGR, respectively, recorded by the two-wheeler and three-wheeler segments. European revenues jumped at a CAGR of 19.6 per cent during the same phase.
In October 2016, the company entered the market with an IPO, which was oversubscribed 43.84 times at an allotment of Rs 472 per share. Strong demand was seen from HNIs and QIBs as the quota for the two categories was subscribed to 127 times and 53.43 times of the quota limits, respectively. The quota for retail investors was oversubscribed 2.60 times.
The issue comprised of 2.46 crore equity shares, including an offer for sale of 1.93 lakh shares by Actis Components and System Investments and up to 0.53 crore shares by Anurang Jain, founder and managing director of the company.
The company allotted the equity shares at 472 per share and got listed in the bourses at Rs. 572 per share, 22% premium over its issue price. The company had raised Rs 348 crore from the anchor investors ahead of the IPO.
Objects of the offer
Endurance Technology is tapping the market with an offer for sale to give an exit to the existing private equity (PE) investor in the company. The company will not get any money from the issue but shall enjoy the listing benefits.
Table 1: Shareholding Pattern Pre & Post IPO
|Actis Components & Systems Investments||13.72%||0|
During the IPO process, Actis Components & Systems Investment completely offloaded its stake from the company. Mr. Anurang Jain, -the promoter, individually sold 3.78% in the IPO process and have to further reduce its family shareholding to 75% over the next three years from the company as a mandatory clause.
The company started with a share capital Rs 45000 with 4500 equity shares of Rs 10 each.
The company raised funds from Standard Chartered Private Equity (SCPEML) which infused Rs 150 crore. SCPEML shareholding in the company was 1.83% as on December 2011.
Table 2: SCPEML Shareholding Pattern over the years
|STANDARD CHARTERED PRIVATE EQUITY MAURTIUS II LIMITED (SCPEML)|
|DATE||PARTICULARS||No. of Shares||TOTAL Value (In INR Crores)|
|Aug 7,2006||Allotment of Equity Shares of face value Rs 10/-share||1,82,590||150|
|Nov 23,2007||Issue of bonus shares in the ratio of 9:1||1,64,3310||1.64|
|Sept 27,2010||Allotment of compulsory convertible preference shares into equity shares of face value of Rs 10/- each||5,86,096||40.00|
|Sept 27, 2010||Face value of equity changed from Rs 10/- share to Rs 4/- share||6,02,9990||0.00|
|Nov 21,2011||Allotment of Equity Shares of face value Rs 4/- share||6,10,604||0.24|
|Dec 22 ,2011||Allotment of Equity Shares of face value Rs 4/- share||8,33,039||0.33|
|May 29,2012||Buyback of equity shares of face value of Rs 4/-each from the securities premium account of the company||8,33,039||38.10|
|Aug 14, 2012||Buyback of equity shares of face value of Rs 4/-each from the securities premium account of the company||6,10,604||4.30|
Endurance Technologies Ltd. had filed a draft red herring prospectus (DRHP) with the capital markets regulator in September 2010. However, the company did not pursue its listing plans since Actis Components & Investments Limited (Actis) bought out SCPEML’s stake in Endurance Technologies in a deal worth INR372.5 crore.
Actis Components & Investments Limited shareholding pattern as on 31st March 2016 was 13.02%.
Table 3: Actis Components Shareholding Pattern Over the Years.
|ACTIS COMPONENTS & INVESTMENTS LTD.|
|DATE||PARTICULARS||No. of Shares||TOTAL Value (In INR Crores)|
|Dec 22, 2011||Purchase of equity shares from of face value from SCPEML of face value of Rs 4/- each||6,64,0594||372.54|
|Aug 14, 2012||Buyback of equity shares of face value of Rs 4/- share by the co.||6,10,604||4.30|
|May 18, 2016||Face value of equity changed from Rs4/- share to Rs 10/- share||24,11,996||0|
|May 29, 2016||Bonus Issue in the ratio of 7:1||1,68,83,972||16.88|
Inspired by his maternal uncle Rahul Bajaj, Mr. Anurang Jain set up an auto components company, Anurang Engineering in Aurangabad in 1986 supplying mostly to Bajaj Auto. By mid-1990s Mr. Jain changed track and moved to proprietary products in four main areas—suspension, transmission, braking and aluminum casting. He also began building his own tools and tied up with European companies for research.
Till 2004-05, Bajaj Auto was the company’s foremost dominant customer. Mr. Jain expanded the company’s client base —building new units to serve other customers.
This was a period of rapid growth at the end of which Anurang Engineering was merged into the new Endurance Technologies, in 2006. Business also moved overseas with two European acquisitions.
The global economic slowdown of 2008-09 hit Endurance pretty hard and the business from global manufacturers also dropped. The company had acquired a debt of close to Rs 900 crore. Despite a decent turnover, the company made a book loss in 2008-09. The company’s net worth was wiped out and it had to revalue its assets.
Mr. Anurang Jain stopped all new investments, let go of loss-making businesses and re-aligned his company by cut backs and consolidating its operations which eventually brought the company back to track in 2009-10.
The mantra of Endurance Technologies now is to only take on business that brings in cash. The strategy is to stay focused on the two- and three-wheeler business which Mr. Jain says has fewer players and is more stable. About 80 per cent of the group’s activity is in this segment.
The European subsidiaries, on the other hand, caters exclusively to passenger car-makers.
Table 4: Endurance Group Subsidiaries Performance (All Fig. in INR Crores)
|ENDURANCE GROUP SUBSIDIARIES PERFORMANCE|
|FY – 2015||FY – 2016|
|Endurance AMANN (100 % WoS) – Europe||368.2||40.99||347||36.15|
|Endurance FONDALMEC (15% Stake)||888.38||26.82||893.38||30.63|
|Endurance Engineering (100% WoS)||12.15||2.77||115.96||2.8|
The company has gained footprint through a combination of organic growth in India and successful inorganic growth through various acquisitions in Europe.
The company is now focusing on its domestic market share. It is upgrading its products and focusing on five main customers in India – Honda, Hero, Bajaj, Yamaha India and Eicher Motors.
The overseas companies are largely for passenger cars and commercial vehicles. Their focus would be on its top five clients – Fiat Chrysler Group, Daimler, BMW, General Motors.
It expects to supply all the four segments to all the top 5 clients and increase their share of business, focus on R&D and manage costs.
Endurance Technologies has a significant size, steadily improving margins and marquee customers having a good foothold in the domestic as well as on the international soils.
Mr. Naresh Chandra is the father of Anurang Jain, and holds 12% stake (pre and post IPO). Endurance Technologies is a family-controlled business which has a structure in which the family who continue to control 82.5% of the business (post IPO).
Before entering the primary market in 2011, the company had already started creating a strong base by deploying expansion strategies through inorganic route in the international markets.
In 2011, decision was taken by the company of not entering the primary markets proved to be beneficial as the Indian market to an extent was considered as one of the worst performers among major markets in that year which may have hampered the success of the IPO.
SCPEML was able to exit the company in a profitable manner having more than doubled its money in five years. The cost of acquisition of share by SCPEML was Rs 222 per share and the company was able to exit the company at a price of Rs 561 per share.
The cost of acquisition per equity share for Actis was Rs 182.04 and through the exit route from the IPO they sold their stake at Rs 472 per share in 2016, having gained a 147% increase in their investment in 5 years.
Endurance technologies was working towards its IPO since 10 years and took various strategic, operational and capital restructuring steps which resulted into creating substantial value for all stakeholders.